Pension Systems Directors Discuss Underfunding Before State Appropriations Committee
The heads of the state’s two public pension systems are working to represent their members while delivering straight-talk about the size of the state’s pension debt to lawmakers.
The commonwealth and school districts now face spiking payments to the funds, scheduled as part of reforms known as Act 120.
Governor Corbett has proposed reducing un-earned benefits of current and future state employees, but his plan is being attacked by unions and Democrats as being unconstitutional and ineffective.
At a hearing before the State House Appropriations Committee, directors of the two pension funds– David Durbin for the State Employees’ Retirement System and Jeffrey Clay for public school employees –encouraged lawmakers to put the state’s 41 billion dollar pension debt in perspective.
Durbin cited the drastic underfunding of the pension systems in the 1980’s, noting that when the economy began to rebound, so did the funds.
The directors’ position echoed that of public sector unions: Let Act 120 work, give it 20 years, and the funds will be in much better shape.
“Time is probably our greatest ally,” Durbin said. “The reason we came out of the underfunding in the 1980s is not just the investment program but the compounding nature of time.”
State Representative Glen Grell (R-Cumberland) pointed out that without any changes, the state and school districts will be required to allot more money from their budgets for pension contributions.
“I heard you say that 20 years from now the funded status will be much improved. 20 years from now, this or that, 25 years, but I want to make sure my colleagues are aware what happens over the next 20 years to get to that point.”
Grell emphasized time comes with a cost –spiking pension payments are looming.
“Would I be fair in saying that, yeah, we might feel good 20 years from now but it’s going to be pretty painful to get there if we don’t do anything other than let Act 120 take its course?”
Durbin and Clay affirmed Grell’s assessment.
That moment during the budget hearing was like countless others in the debate over proposed pension overhauls – acknowledgement of a problem, but no consensus on a solution.